For investors accustomed to the seemingly unstoppable gains of 2024, last week was a jolt. The Dow Jones Industrial Average took a steep tumble, leading to the usual flood of alarming headlines and red chyron banners declaring a market sell-off.

The rest of the week saw more fluctuations, punctuated by strong rebounds. When the dust settled, the market’s weekly performance showed only a slight change, far less dramatic than the headlines implied. While I believe recent volatility shouldn’t be ignored, there’s no need to panic.

Market downturns are never pleasant, especially after a period like we’ve seen in 2024, where stocks kept reaching new highs with minimal drama. However, maintaining a proper perspective is crucial for navigating—and potentially benefiting from—a market decline.

Here’s a crucial point to consider about market pullbacks: They often feel much worse than they are.

A 1,000-point drop in the Dow is hard to sugarcoat. It’s nerve-wracking. Last Monday, the Dow fell by 1,034 points, marking the 12th-largest single-day point drop in history. Yet, this isn’t uncharted territory.

While the numbers are striking, it’s worth noting that Monday’s 1,034-point drop was a 2.6% decline. By comparison, a similar drop of 1,033 points on February 8, 2018, represented a 4.2% decrease. Last Monday’s decline in the Dow was significant, but it wasn’t unprecedented.

Sure, market downturns, regardless of their size, can be unsettling. The 3% drop in the S&P 500 last Monday grabbed a lot of attention and caused even more anxiety. But what about the 3% rally during the first few days of July? Or the more than 2% surge in the last days of July? Do you remember those? They probably don’t stand out as much because, let’s face it, declines tend to have a different impact. Besides, the media routinely emphasizes bad news.

That’s especially true during a U.S. presidential election year. Political partisans called Monday’s decline the “Kamala crash,” an assertion that’s patently absurd.

This highlights the importance of keeping a broader perspective. This recent dip came after the market hit record highs, with last week’s lows leaving the S&P 500 just 8% below its all-time peak. The frenzy of market volatility can often make investors lose sight of previous gains.

Taking a step back shows that even with Monday’s decline, the stock market is still up nearly 20% from last year and 50% since this bull market began in October 2022. We’re also in good shape year to date (see chart).

A closer examination of the underlying economic indicators reveals an optimistic scenario, one that contradicts fearmongering tactics.

In reality, the economy continues to exhibit robust health, underpinned by solid fundamentals and strong corporate earnings. The labor market remains tight, consumer spending is resilient, and corporate profits have shown consistent growth, a combination that hardly suggests an imminent recession. That hasn’t stopped candidate Trump from darkly warning of a 1929-style market crash and economic depression.

(If you hold a different perspective about U.S. economic prospects, express your opinions in an email to me: mailbag@investingdaily.com. I value reader feedback.)

It’s important to recognize that while the stock market is sensitive to such political noise, temporary pullbacks driven by these fears can actually present strategic buying opportunities.

Savvy investors understand that the fundamentals of the economy remain strong, and they can capitalize on the market’s overreactions to politically motivated narratives. History has shown that when the underlying economy is sound, market dips are often followed by recoveries, rewarding those who stay the course.

The week ahead…

The following economic reports, scheduled for release in the coming says, are likely to sway market sentiment:

NFIB optimism index, producer price index (Tuesday): consumer price index (Wednesday): initial jobless claims, retail sales (Thursday); consumer sentiment, housing starts, building permits, and homebuilder confidence (Friday).

There will be lots of market-moving data to unpack this week. The roller coaster ride might not be over, but long-term prospects remain positive.

The main U.S. stock market indices closed mixed Monday as follows:

• DJIA: -0.36%
• S&P 500: +0.00%
• NASDAQ: +0.21%
• Russell 2000: -0.91%

The S&P 500 and tech-heavy NASDAQ managed to carve out small gains, as stocks retained their momentum from late last week.

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Editor’s Note: If you’re looking for ways to generate high but safe income, regardless of today’s topsy-turvy conditions, consider the advice of my colleague Robert Rapier.

Robert Rapier is the chief investment strategist of Utility Forecaster, Income Forecaster, and Rapier’s Income Accelerator.

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John Persinos is the editorial director of Investing Daily.

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